As expected, HMRC have formally announced that the Business Risk Review (BRR+) Indicators will now incorporate the OECD Pillar Two Top-Up Tax within low risk indicator 4 for relevant groups. At this time, Pillar Two does not fall within the scope of the Senior Accounting Officer (SAO) regime.
HMRC’s approach
At the international level, tax policy has largely been focused on Pillar Two and this adjustment demonstrates HMRC's ongoing dedication to ensuring the BRR+ process remains both relevant and effective.
More generally, HMRC are implementing a more comprehensive approach, which includes requests for supplementary supporting evidence and documentation.
HMRC are focusing their efforts on corporations deemed to be of higher risk, specifically those assigned a moderate high or high BRR+ rating within the High Risk Corporates Programme.
HMRC's scrutiny extends beyond the largest enterprises, as evidenced by the introduction of the temporary Customer Compliance Manager (CCM) model. This initiative is designed to strengthen compliance efforts within large groups that do not have an assigned permanent CCM and are not subject to an HMRC business risk review.
What should impacted groups do?
Following this change, businesses should ensure they can demonstrate to HMRC that they have met these new requirements during upcoming BRR+ meetings. The initial emphasis will be on registration compliance, followed by a transition to full compliance with the regime.
It will also be important for impacted groups to integrate Pillar Two into their existing tax control frameworks, including tax policies, tax controls and RACI matrices to show HMRC that key Pillar Two risks have been identified, addressed and that the process is under control.
Groups that are proactive in advance of an upcoming business risk review in showcasing their tax governance to HMRC are best placed to manage subsequent questions from HMRC. Proactive engagement enhances efficiency, reduces the risk of penalties, effectively manages stakeholder expectations and can positively influence the determinations made by tax authorities.
Tax governance compliance should be treated as a substantive process rather than simply a procedural formality. Organisations are encouraged to implement practical, proportionate and commercially sound practices, especially in light of HMRC’s expanded resources and consequent heightened ability to ensure compliance and maximise tax revenue.
How KPMG can help
We have considerable experience in assisting businesses to minimise HMRC interventions by providing proactive support with BRR+ preparation and enhancing overall tax governance measures. Should you need any support with tax governance matters, please speak to the authors or your usual KPMG in the UK contact.
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